SIFMA Comments on PWG Report
SIFMA's Asset Management Group also submitted comments to the SEC in response to its "Request for Comment on Potential Money Market Fund Reform Measures in President's Working Group Report." SIFMA's letter, entitled, "Potential Reform Measures for Money Market Funds," says, "The Asset Management Group of the Securities Industry and Financial Markets Association ('SIFMA AMG') respectfully submits this comment letter to the U.S. Securities and Exchange Commission with respect to the Commission's request for comment on potential reform measures for money market funds.... We appreciate the opportunity to provide our views to the Commission on these matters that have the potential to impact not only the direct regulation of money market funds, but also the overall functioning of the short-term funding markets. Our comments focus on the following main points: The important role of money market funds and the effectiveness of previously enacted reforms to money market funds. Money market funds play an important role in the orderly functioning of the short-term funding markets and serve valuable financial and economic functions for a variety of investors (including both retail and institutional investors) and the capital markets more broadly. Policy measures that have the effect of eliminating or significantly decreasing the size of the prime, retail, and tax-exempt money market fund sectors will significantly impair the resilience and orderly functioning of the short-term funding markets." Their second main point involves, "The liquidity crisis in March 2020 and a narrowly tailored money market fund policy response. An unprecedented and rapidly developing market-wide liquidity crisis occurred in March 2020 fueled by the COVID-19 pandemic. Money market funds were not the root cause of the stresses in the short-term funding markets in March 2020, but, rather, like other participants in the short-term funding markets, were reacting to and managing through a market-wide liquidity crisis. Policy responses to the liquidity crisis in March 2020 should focus on and prioritize addressing root causes in the segments of the short-term funding markets that caused market stresses in March 2020. Any policy measures should be narrowly tailored, data driven, simple to understand and implement, and calibrated to address the liquidity pressures that manifested in a relatively small segment of the money market fund industry in a manner that preserves the viability of such products for investors." SIFMA's third point addresses, "Effectiveness of policy measures in the Report. As more fully discussed herein, SIFMA AMG views delinking liquidity thresholds and liquidity fees and redemption gates as the most effective way to achieve the stated goals of money market fund reform." It adds, "SIFMA AMG strongly agrees with the Report's exclusion of money market funds that operate as 'government money market funds' from future rulemaking.... SIFMA AMG strongly opposes bank-like requirements for money market funds, such as minimum balance at risk ('MBR') requirements, capital buffers, requiring liquidity exchange bank ('LEB') membership, or requiring sponsor support. Such policy measures do not advance the stated goals of money market fund reform and are not responsive to (and therefore not effective in addressing) the liquidity stresses that arose in March 2020. Such requirements would have the effect of eliminating or significantly decreasing the size of the prime and tax-exempt money market fund sectors, thereby impairing the resilience and orderly functioning of the short-term funding markets. SIFMA highlights the role of the Commission as the primary regulator of money market funds and urges the Commission to advance market-driven regulatory solutions rather than bank-driven measures." Finally, they write, "SIFMA AMG generally opposes a requirement for all prime and tax-exempt money market funds to float their net asset value because such policy measure does not address the types of money market funds that experienced the largest outflows in March 2020 and the implementation of a floating net asset value for prime institutional money market funds did not prove effective in slowing redemptions in March 2020. Many of our members generally do not view this policy measure as advancing the stated goals of money market fund reform, and find such policy measure not responsive to (and therefore not effective in addressing) the market-wide liquidity stresses that arose in March 2020."
